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China’s currency conundrum

Posted on 29 April 2014

It seems the People’s Bank of China (PBOC) cannot win. In late February, the gradual appreciation of the renminbi was interrupted by a 1 per cent depreciation (to $1:¥6.12). Though insignificant in overall trade terms, especially when compared with the volatility of floating exchange-rate regimes, the renminbi’s unexpected weakening sparked a global furor.
This is hardly surprising. After all, China has been under constant pressure from foreign governments to revalue, in the mistaken belief that a stronger currency would reduce China’s large trade surplus. And, since July 2005, when the exchange rate was $1:¥8.28 (and had been held constant for 10 years), the PBOC has implemented more or less steady appreciations of about 3 per cent per year through 2013………………………………………..Full Article: Source


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